Law: Income Tax Act, 1961

Section: 37

(a) Income-tax--- ----Business expenditure---Betterment charges---Not deductible--- Indian Income Tax Act, 1961, S.37. (b) Income-tax----Capital or Revenue expenditure---Bank guarantee commission--­Revenue expenditure---Indian Income Tax Act, 1961, S.37. Held, (i) that the Tribunal was right in law in holding that the betterment charges were not deductible in the computation of total income. CIT (Addl.) v. Rohit Mills Ltd. (1976) 104 ITR 132 (Guj.) and Arvind Mills v. CIT (1992) 197 ITR 422 (SC) fol. (ii) that the bank guarantee commission paid by the assessee was a Revenue expenditure and hence allowable as a deduction in computing the total income. CIT (Addl.) v. Akkamaba Textiles Ltd. (1997) 227 ITR 464 (SC) and CIT v. Sivakami Mills Ltd. (1997) 227 ITR 465 (SC) fol. CIT (Addl.) v. Akkamba Textiles Ltd. (1979) 117 ITR 294 (AP); CIT v. Bharat Suryodaya Mills Co. Ltd. (1993) 202 ITR 942 (Guj.); CIT v. Vallabh Glass Works Ltd. (1982) 137 ITR 389 (Gui.) and Sivakami Mills Ltd. v. CIT (1979) 120 ITR 211 (Mad.) ref. JUDGMENT C.K. THAKKAR, J.---In Income-tax Reference No.72 of 1984 the following two questions have been framed for the opinion of this Court: "(1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the betterment charges were not deductible in the computation of total income? (2) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that expenditure by way of bank guarantee commission is expenditure of capital nature and not deductible in computation of total income?" In Income-tax Reference No.73 of 1984, the following three questions have been framed for the opinion of this Court: "(1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the betterment charges were not deductible in the computation of total income? (2) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that expenditure by way of Bank guarantee commission is expenditure of capital nature and not deductible in computation of total income? (3) Whether,…

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